Obradovich: Budget plans differ on what's 'sustainable'

Feb. 28, 2013

The buzzword at the Iowa Capitol Wednesday was “sustainable,” as House Republicans and Senate Democrats released dueling budget proposals that spend less than legislators are legally allowed.

“We want to put in place here a sustainable budget that is stable over time and sustainable over time, and yet reflects the values and the needs that we have in the state,” said Senate Appropriations Committee Chairman Bob Dvorsky, D-Coralville.

His House counterpart, Rep. Chuck Soderberg, R-Le Mars, opened his remarks much the same way and said, “The budgets do accomplish our goals. It’s a balanced and sustainable process.”

To Republicans, “sustainable” means a 3 percent increase in general fund spending, or a little over $100 million less than Gov. Terry Branstad proposed. The plan spends 98 percent of ongoing revenue, but only 89.6 percent of money available for legislators. That’s because Republicans are keeping their mitts off the roughly $800 million ending balance, at least for government programs. Instead, their plan is to give it all back to taxpayers through a one-time credit.

Their main concern is to avoid paying for ongoing expenses today with money that won’t be available tomorrow. That way, if state revenues dip, legislators won’t be forced to make drastic cuts. And if revenues continue to rise, that just makes more money available for tax cuts.

Democrats, on the other hand, define “sustainable” as a spending increase of almost 11 percent, or about $355 million more than the governor proposed. Their plan, they said, spends about 94.7 percent of available state revenues but leaves over $320 million in the ending balance. They argue their budget strengthens the middle class and meets Iowans’ objectives of improving education and providing affordable health care.

Branstad, by the way, also likes to refer to his budget as “sustainable.” His plan, predictably, is between the House and Senate versions, with a 4.3 percent increase. However, he’s much closer to House Republicans this year than last, when GOP legislators undercut his plan by over $180 million.

Whether you would call any of these budget proposals sustainable depends on your assumptions about the future. Republicans see the state’s current, robust revenue growth as fragile. Rep. Mark Lofgren, R-Muscatine, presented a 14-point list of potential budget bogies, starting with the fact the state has had five across-the-board cuts over the past 20 years.

There’s also the drought, sequestration, federal tax increases and budget issues related to Medicaid, workforce development and transportation, Internet sales eating into state taxes, state underfunding of its pension obligation and even the interest on the I-JOBS infrastructure program from the Culver administration. There’s more, but you get the picture.

Democrats, on the other hand, say their plan is sustainable because it spends less than the legal limit, which is 99 percent of estimated revenues. In addition, the Democrats’ budget factors in the costs of their plans to increase the earned income tax credit and provide property tax relief to businesses.

Branstad and his staff have said his plan is sustainable because it saves most of the ending balance to help cover larger outlays in the next few years for education reform and property tax relief. So, Branstad thinks sustainability involves saving much of the budget surplus to spend later. His Republican counterparts think sustainability involves stricter limits on spending and giving the surplus back to taxpayers. And Democrats think it’s sustainable to spend most of the surplus, as long as they don’t spend it all and it’s for things Iowans want.

Republicans may be taking their concerns about the future of state revenues to extremes, but that argues against giving back the entire surplus at once. Meanwhile, cautious Iowans probably won’t see an 11 percent increase in state spending as prudent, even if they agree with how it’s spent. If we’re lucky, there will be a new buzzword before long: compromise.